101 Existing ways local Authorities can deliver their own affordable housing
HTA Design LLP were pleased to host a round table discussion to debate the increasing contribution local authorities are making to housing delivery.
Janice Morphet, visiting professor at UCL Bartlett School of Planning, began explaining the research she has commenced to identify current pathways being used by councils to deliver homes. The research, although in its early stages, identifies 175 councils who are pursuing their own approaches. Janice set a context of 'Why, How and What' they are doing.
The main drivers were to manage homelessness cost exposure but also to create an income stream in times of cuts. Importantly, there was also a reflection of demands from changing demographics with housing for special groups which is not being met by private developers.
The research has so far identified a very wide range of approaches being deployed from using their own land to the use of Local Authority pension funds, establishing housing companies or devco's to joint venture (JV) structures with the private sector. More bullish authorities are exploring the use of CPO to gain control of land with unimplemented planning consents. The early adopters are building all tenures and taking commercial approaches to development. Janice explained the objective of the study was to create a public database of approaches and case studies to promote greater sharing across authorities and faster delivery of new homes.
Our second speaker - Colm Lacey, CEO of Brick by Brick (LB Croydon's housing company) agreed that temporary accommodation/emergency housing costs and income creation are important. He also added that a vital objective is to deliver a higher proportion of affordable housing from development than the private sector seemed prepared or able to do. Although it is important to ensure achieving good design outcomes, which was an essential part to changing perceptions about council built homes.
Describing their approach as 'commercial in character', Brick by Brick [BbB] develops for sale housing with 50% affordable homes delivered while returning the market value for sites purchased from the council. Croydon raises finance from the PWLB which are 'on lent' to BbB at market rates, also adding a coupon to the income returns to the council. BbB are a 'non contracting authority' with freedom to act commercially while supported by the council. It currently has 20 sites in preparation.
The following discussion, chaired by Mike De'Ath, Partner HTA Design, started by raising points regarding capacity, skills, recruitment and competition with the private sector for experienced staff to deliver ambitious programmes. As highlighted in the recent Farmer Review, the industry faces a major challenge of retiring senior staff and lack of new entrants from school leavers. Meanwhile, authorities noted the challenge of recruiting staff and a real gap in experience emerging. Consultants who work for more than one authority noted the benefits of knowledge transfer but also that every borough seems to have its own way of working.
The recent White Paper was seen as a clear recognition from the government that the housing market was broken and has therefore placed local authorities at the centre of delivery. It was however noted that development is risky and there was little tangible able support to councils, indeed the threat of imposing RTB on properties delivered by stand-alone vehicles and companies could be a disincentive.
Developers present reflected that local authorities and their vehicles were more open to discussion about opportunities than previously and noted the benefits of getting long-term partners involved in projects earlier to bring expertise to aid delivery. It was generally agreed that in such relationships, the private sector only makes money if there is an active public sector and it was good to see increasing evidence of growth in JV's and similar approaches to delivery. But more constancy regarding JV models used by local authorities would be hugely beneficial.
A discussion regarding house builders dismissed as a myth the issue of land banking or sitting on consented sites as mainstream practice. The return on capital model means that this is counter to the business interests of most house builders. An issue was however raised regarding complex section 106 negotiations delaying progress. Local authorities assured house builders present that they had an equally hard ride from planning departments. Riette Oosthuizen, planning partner at HTA Design, commented that S106 is not applied consistently between even neighbouring authorities and that addressing this and also a common approach to viability analysis as proposed in the London Mayors SPG would help given greater certainty to all.
The pressure on authorities to deliver was driven by the need to spend RTB receipts within 3 years before losing cash to the Treasury and this was seen as a driver behind some of the innovative approaches to getting homes built. The discussion returned to the issues of capacity in the construction industry. Offsite manufacture was seen to have an increasing role and there was much discussion regarding the benefits but a recognition that more capacity was needed here also. One developer/modular specialist present spoke of their approach to increasing supply by building new homes on the roofs of existing apartments targeting a potential 150k homes.
Finally, the importance of sharing best practice was noted and agreed by all and we look forward to the final UCL report at the end of the year.